How to anticipate the unforeseeable with the hardship clause

In a context of inflation, shortages of raw materials, supply-chain tensions and fast-moving regulatory changes, securing your contracts is vital.

The so-called “hardship” clause (also known in France as the imprévision clause) provides a framework to renegotiate when performance has become excessively onerous due to unforeseeable circumstances.

Since the adoption of Article 1195 of the French Civil Code (2016 reform), the imprévision doctrine has been fully recognised in French private contracts: if an unforeseeable change of circumstances makes performance excessively costly, the affected party may request a renegotiation.

Failing agreement, the judge may adapt the contract or terminate it.

This article offers an operational roadmap to understand, draft and use a hardship clause effectively, with concrete examples and a drafting checklist.

1) Hardship vs. force majeure: know which lever to activate

• Force majeure addresses an impossibility to perform caused by an external, unforeseeable and irresistible event. It suspends performance or releases a party from it (exoneration).
• Hardship addresses a situation where performance is still possible but has become exorbitantly burdensome due to an unforeseeable change. It opens a right to renegotiate, without automatically suspending obligations (unless the contract provides otherwise).

In practice: for economic shocks (sharp energy spikes, soaring logistics costs, costly new compliance rules), the hardship clause is the right tool; force majeure applies where an event materially prevents performance.

2) When is a hardship clause useful?

It is particularly relevant for:

• Long-term agreements (supply, distribution, recurring services, framework/master agreements).
• Sectors exposed to volatility: food & beverage, construction, industry, energy, tech (components), transport/logistics.
• International supply chains: exposure to FX variations, customs duties, import disruptions.

Key benefits:

• Preserve the commercial relationship instead of rushing into termination.
• Structure a framed renegotiation (timelines, evidence, fallback scenario).
• Allocate economic risks in a predictable and acceptable way for both sides.

3) Activation conditions: the spirit of Article 1195

To be credible and effective, the clause should mirror (or refine) the logic of Article 1195 of French civil code :

1. Unforeseeable change of circumstances at the time of contracting (e.g., regulatory shock, exceptional surge in raw-material prices, supply disruption).
2. Performance has become excessively onerous for one party (not merely less profitable).
3. No acceptance of the risk: the party invoking imprévision must not have expressly agreed to bear such risk (beware of acceptance/waiver wordings).
4. Good-faith request to renegotiate, with an obligation to continue performance during the renegotiation if the contract requires it (very useful to avoid operational breakdowns).

Watch-out: many contracts exclude Article 1195 (waiver of imprévision). In that case, only your contractual hardship clause will open the door to renegotiation. Do not waive imprévision blindly—insert a tailored hardship clause.

4) How to draft a robust hardship clause

Here is a practical checklist I use when drafting or auditing:

a) Trigger

Define precisely what constitutes a material change:

• Public indices (INSEE, Eurostat, commodity indices, energy prices).
• Quantified thresholds (materiality): e.g., cumulative increase > 10% over 3 months.
• Regulatory events (new tax, ban, mandatory compliance causing substantial costs).

b) Notice & evidence

• Formalities: written notice, named recipients/addresses, acknowledgement of receipt.
• Content: facts, numbers, sources, impact on costs/lead times/margins, proposal for adjustment.
• Timing: maximum time to notify after discovering the event (e.g., 15 days).

c) Renegotiation mechanics

• Schedule: x days to start, y days to conclude (e.g., 15 / 30 days).
• Good faith: information sharing, confidentiality, reasonable objectives.
• Continuity of service: deliveries/services continue during talks (where feasible).

d) If talks fail

• Escalation: institutional mediation / independent expert (e.g., accountant or engineer to recalibrate price).
• Expert’s mandate: recommendation only or binding determination (describe the calculation method).
• Safety net: failing agreement, referral to the court to revise or terminate (reminder of Art. 1195).
• Optionally, amicable termination without fault, with a notice period to limit operational damage.

e) Economic parameters

• Alignment with indexation clauses (avoid contradictions).
• Caps/floors to prevent abuse.
• Sharing of extra costs: cost-sharing formula, step increases, provisional price while awaiting final outcome.

f) Scope & exclusions

• Exclude risks already accepted (e.g., ordinary fluctuations).
• Exclude internal events (poor management).
• Avoid double counting: don’t trigger hardship and contradictory penalties.

g) International & compliance

• Consistency with governing law and jurisdiction.
• Where Incoterms/import-export apply: clarify who bears which risks (customs, freight, insurance).
• Reinforce confidentiality for renegotiation exchanges.

5) Concrete examples

• A mid-size F&B company sees sugar and energy rise by 25% in two months. The hardship clause (threshold: +10% over 90 days) enables a price recalibration with the distributor while maintaining deliveries. Failing agreement, a third-party expert calculates a provisional adjustment later validated by the parties.
• An upstream supplier reduces chip allocations and lead times explode. The clause provides for contractual prioritisation, rescheduling of deliveries and temporary sharing of extra logistics costs, with a 60-day review.
• A new carbon-cost rule increases travel and spare-parts prices in a long-term maintenance contract. The clause allows an indexed adjustment based on a basket of public indices, with a quarterly cap and mediation in case of disagreement.

6) Limits and common pitfalls

• Hidden waiver of imprévision: many T&Cs exclude Art. 1195. Spot and negotiate removal or insert a tailored hardship clause.
• Vague trigger: without thresholds and indices the clause is toothless (or invites disputes).
• Unrealistic timelines: set short but workable milestones or negotiations will stall.
• No fallback mechanism (expert/mediation): you’ll end up in court too fast.
• Inter-clause inconsistencies: indexation, penalties, termination, SLAs—all must fit together.

7) Operational playbook (beyond the legal wording)

1. Map your critical contracts: term, volume, dependencies, risk clauses.
2. Choose your reference indices: energy, commodities, transport, FX.
3. Set thresholds suited to your business (10%, 15%, 20%…) and define a clear scope.
4. Standardise a renegotiation protocol: notice templates, secure data-room, standard timeline.
5. Train teams (procurement, sales, finance) to spot signals and document impacts.
6. Steer performance: dashboard of renegotiation requests, outcomes, timing, value/risk saved.
7. Plan client/supplier comms: constructive stance, measured transparency, business continuity.

8) Quick FAQ

Does a hardship clause suspend penalties?
Not automatically. You may provide for a temporary suspension of penalties tied to delays directly caused by the triggering event during renegotiation.

Can hardship be triggered if indexation already exists?
Yes—if the increase exceeds what indexation absorbs. Coordinate both mechanisms to avoid overlap or contradiction.

What if the other party refuses to renegotiate?
Provide for mandatory mediation, then, as a last resort, court intervention (revision or termination). Article 1195 operates as a safety net.

9) Why seek legal support?

The challenge is not merely “adding a clause”, but aligning it finely with:

• your margins, existing agreements, suppliers and clients,
• your indices (and their availability),
• your contract portfolio (overall coherence),
• your strategy (avoiding a flood of un-managed renegotiations).

Tailored support helps secure your contracts legally and operationally, anticipate scenarios and equip your teams with concrete tools (templates, processes, dashboards).

👉 To explore broader contract structuring and risk management, visit my business law page.

Conclusion

A hardship clause is an essential contractual shock-absorber in an age of economic turbulence. Well-designed (measurable trigger, timeline, resolution methods, continuity), it enables you to adjust without breaking, share unforeseen burdens fairly and preserve the relationship. By coordinating hardship with your indexation, penalties and SLAs, you gain resilience and predictability.

Need a rapid review of your contracts?

I propose a “Hardship” audit:

• review of 3–5 key contracts,
• risk mapping,
• a sector-specific clause template,
• a ready-to-use renegotiation protocol.

👉 Get in touch for an initial discussion: I’ll help you calibrate a workable, enforceable hardship clause that protects your margins without damaging the relationship. For additional levers to secure your operations, see my business law page.